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A New Chapter for the Book

The rise of the e-book has left many fearing for the future of the printed word. Yet, there is room for them both to peacefully co-exist, as long as publishers make the most of new platforms, without losing sight of their traditional strengths.

By way of research into the future of book publishing in the age of the Kindle, Kobo and iPad, MT has become a patron of the arts, doing its bit to help first-time author Jennifer Pickup into print. We pledged to pay £12 for a hardback of her crime novel Unbelievable, should it make it to production.

Her publisher, Unbound, is a new outfit with an innovative demand-led business model in an inky old industry dominated by the supply side. The firm's authors, from the well known (such as the Booker-shortlisted Tibor Fischer) to the unpublished (such as Ms Pickup), describe the book they want to publish on its website - what it's about, who it's for - and they can even leave videos of themselves reading extracts. The public can then pledge to buy these books. Entry level support is £6 for the e-book version, rising to £12 for the hardback, all the way up to £250, for which sum the pledgee's name may grace a character in the book. When the support reaches a pre-determined level (typically, some thousands of pounds), the book is printed. If it doesn't, it isn't. What could be fairer than that?

Unbound is one of the more radical new models in a sector where many existing players are struggling to get to grips with the implications of digital technology. Trade book publishing (which means the works you find on sale on Amazon and at Waterstones) was once regarded as the fustiest of industries: a gentleman's profession run from tome-filled garrets in Soho, where making money was somewhere below choosing the wine at lunch on the chairman's list of priorities. It now stands on the brink of huge technological change, as Tom Weldon, CEO of Penguin UK, says: 'Our industry is going through more changes now than it has for the past 300 years.'

What he's referring to, of course, is the e-book revolution, where customers have been abandoning the dead-tree original in their droves, in favour of sleek new electronic book readers such as Amazon's Kindle, WH Smith's Kobo and the choice of the well-heeled hipster literati, the iPad app. In the US, Barnes & Noble's Nook is also a serious player.

Apple has sold getting on for 30 million iPads since its launch in 2010. Amazon is coy about Kindle sales but analysts reckon it has shifted around 35 million units since its launch in 2007. The latest version, the Kindle Fire, launched in the US last November. At $199, it's more expensive than the regular Kindle, but it has more functionality, a colour screen and it's still only half the price of the iPad. Sales are expected to be brisk.

The advent of the electronic reader is not the first big upset that publishers have had to cope with. That honour goes to the scrapping of the price-setting Net Book Agreement in 1997, which allowed big chains and supermarkets in on the retail action. But online bookseller Amazon had appeared two years earlier and had already begun to change the game. However, the e-book has been by far the biggest upset to conventional publishing in the 570 or so years since Johann Gutenberg devised his printing process. Nothing has threatened the dominance of the ink-on-paper printed word as much as its meteoric rise.

Publishers - despite that dusty stereotype - seem to have been making hay as a result. In August, Harper Collins (owned by News Corp) said it had had its best year since 2008. Penguin (Pearson) also had a notably good 2010, while Bloomsbury (a listed company and home to the Harry Potter franchise) said that the first six months of 2011 had been unexpectedly strong, with both the UK and US markets performing above expectations. Bloomsbury's CEO, Nigel Newton, said: '2011 remains the year of the e-book, with our sales in the first half surging by 564%.'

In the US, e-books now outsell conventional hardbacks. Analysts reckon that Amazon alone will make about $8bn in 2012 from sales of readers, e-books and accessories. Meanwhile, Apple (plus five other large publishers) is under investigation by the EU authorities for possible e-book price-fixing.

The sheer size of Amazon causes many traditional publishers concern. Ask them what their biggest worry is and they'll tell you that it's ensuring there are still multiple routes to market. An effective online monopoly would be very bad news indeed for publishers.

On high street - and main street - things aren't so rosy, however. In the US, bookshop megachain Borders filed for bankruptcy early last year, and in the UK there are only two major high street chains left: WH Smith and Waterstones. The latter has been struggling and was sold earlier this year to Russian billionaire Alexander Mamut's A&NN Capital Fund Management. It goes without saying that there has been no respite for the fondly evoked small independent bookshops, most of which have been struggling for years.

But if publishers are doing better than expected so far, that's no reason for complacency. As Penguin's Weldon says: 'There are some obvious icebergs ahead.' The newspaper and music industries have shown how short-term electronic excitement can quickly turn to long-term digital despair. As its content goes virtual, publishing faces a broadly similar trio of threats, too - the first, piracy; the second, relentless downward pressure on prices; the third, disintermediation.

Pirated e-books are readily available. If you Google anything from The Girl with the Dragon Tattoo to this writer's own small efforts, you'll find free downloads on the web. Yet it's not quite the online Gotterdammerung that file-sharing has been for music. Richard Charkin, executive director of Bloomsbury, explains: 'There are some crucial differences - one is that even bestselling books have a more limited audience than music. Another is that we never issued unprotected digital copies of our back catalogue in the form of CDs. Books have been DRM'd since the beginning.' DRM - digital rights management - is technology that prevents unauthorised copying and distribution of content, be that music or e-books.

There are cultural factors too - music companies always had something of an image problem as rip-off merchants, while readers rarely gripe about paying a fiver for a paperback. And, finally, book readers may be a relatively law-abiding bunch compared with music fans. Victoria Barnsley, UK chief executive of Harper Collins, says: 'Book consumers do seem willing to pay for digital content.' However, she warns, piracy remains a very real threat. In some countries - Russia, for example - book piracy is now as acceptable as its musical counterpart.

On to threat number two. Discounting is nothing new and has been going on since the end of the Net Book Agreement (interestingly, one of the earliest proponents of discounting was Waterstones, which is now tasting its own medicine at the invisible hands of the market). However, digital has again changed the game. When Amazon started selling e-books, it often sold them very cheaply, almost as a loss leader, to stimulate interest in its Kindle reader. Concerned by this wholesale erosion of their margins, in 2010 major publishers moved to the 'agency model', with Kindle e-books (where they, not Amazon, set the prices) using the iPad's launch as leverage.

They have cause indeed to worry - six of today's UK Kindle top 10 books cost less than £1 and only two are over a fiver (that's without even considering the Kindle free top 10). This reflects both discounting by big publishers and self-published/non-traditionally published books being sold very cheaply.

Of course, there are good reasons to sell a book for less than £1, not least that doing so could send it shooting up the all-important Kindle bestseller list and thus attracting even more customers. The marginal costs of an e-book are tiny, so it is theoretically possible to see a return even on a £1 sticker price, if you sell enough. It can also feed back into sales of higher-margin physical books and e-books once the promotion is finished. But it also starts to normalise the idea that 96p is all that a full-length book is worth - and this is not a sum that enables authors to earn a decent living, or one that supports the long-term viability of the industry. As Barnsley says: 'A great concern is the perception of the value of the book.'

This brings us neatly to the third point, disintermediation, perhaps the biggest risk of all. With digital, who needs traditional publishers? Self-publish an e-book and you get to keep a far greater slice of the price than you would with a regular book deal. Take the case of Amanda Hocking, the young American writer who became an e-book sensation with her self-published paranormal 'young adult romance' novels (including My Blood Approves, Fate and Hollowland) which sold in their millions on Amazon. Hocking, at the time, was an 'unpublished' author.

At the other end of the spectrum, legendary author's agent Andrew 'the Jackal' Wylie also seems to think this is a model that has legs, even if it's not so long since it was known witheringly in the trade as 'vanity publishing'. Wylie's clients include Martin Amis, Al Gore and Paul Theroux and he caused waves last year by announcing he was going to do deals for digital books directly with Amazon on some of his backlist, bypassing the big publishers altogether.

'Very, very big names might decide they want to go it alone,' concedes Barnsley. But for authors who are starting out, she believes that self-publishing will simply become another route to what new writers have always wanted - a book deal with a big name. In 2011, notes Barnsley, about a year after she started selling e-books, Amanda Hocking signed a $2m contract with St Martin's Press, explaining that she was a writer, not a publisher.

Publishers still have a few other shots left in their locker, too. From the customers' point of view, they offer a professionally produced, quality product - by contrast, many self-published e-books have terrible typesetting and are littered with misspellings and grammatical howlers. They also act as curators: as Robert Kirby of United Agents says: 'Self-publishing is great - the problem is quality control.'

Quality control is important because of the time commitment involved in reading a book: the downside risk of buying a bad novel is greater than that of downloading a dodgy music track or album. 'If you factor this in, the cost of a book is about £500. Looked at this way, you might want to spend £505 and get something good, rather than take your chances spending £500.50,' says Bloomsbury's Charkin.

E-books also have the potential to add a range of new features to a product that has been essentially unchanged for centuries, drawing in new readers raised on the internet and computer games. 'Enhanced e-books are very interesting,' says Barnsley. 'It might become normal for music to accompany fiction, or you could have readers interacting with the text.' And, as e-readers become more sophisticated and reproduce colour better, the scope for innovation in, for example, children's books will grow hugely. Take Penguin's recent deal with Mind Candy to produce a series of books - and apps - about the company's virtual Moshi Monsters, a huge hit with the nation's web-surfing under 10s.

All of which is likely to mean more work for authors - and not all of it writing. Where readers were once happy with a new novel every couple of years, now they expect more frequent and informational contact, whether it's blogging, tweeting or short stories between the novels. Not to mention signings, readings, events and general networking. JD Salinger was lucky to have lived when he did.

Digital also helps keep backlists alive and brings books with limited print runs to life - the internet's famous 'long tail' in action. Kirby says: 'You see publishers buying up specialist backlists such as shipbuilding and railways, which you know can give you a good, solid, quiet turnover and provide a bit of security in an insecure market.'

So, are the days of walls lined with groaning bookshelves really numbered? Is a fully loaded Kindle or iPad really an acceptable substitute? It's worth remembering that, for all the excitement of digital, a lot of people still like physical books and these are not going to disappear, especially if they're the kind of lavishly produced volumes made for showing off on coffee tables. Kirby says: 'Publishers are looking at production values. For a while it was all about reducing the costs of publishing. But if you take a book like Claire Tomalin's biography of Dickens, it's a wonderful object.' In fact, he adds, 'For publishers that remember what they do - and do it well - it's all to play for.'

As it also seems to be for MT's very own new writer over at Unbound. Having achieved the required level of public backing, Jennifer Pickup is about to see her name in print on the cover of Unbelievable. Such is the power of the market.

There's one more point in favour of British publishers - the English language. Thanks to its status as the world's lingua franca, reaching global markets with e-books published in the UK has never been easier. 'There are fantastic opportunities for overseas sales,' says Charkin. 'Because our core market is so much smaller, we're better at selling internationally than the Americans are. We're better at serious fiction and we're better at children's books. Thank God for the English language.'